Outlook: Crude prices continue to whipsaw in a range between the 100 & 200 day moving averages. Refined products have faced stronger headwinds which has resulted in crack spreads weakening. The demand outlook continues to be debated heading into summer with interest rate pressure and geopolitical risk in a tight clash. Natural gas prices have finally lifted from the doldrums with Freeport LNG coming back online and the prospect of strong cooling demand this summer. OPEC remains the most bullish of the big three (EIA, IEA, OPEC) and held their 2024 and 2025 global oil demand outlook unchanged. The IEA will report its monthly report tomorrow and has previously seen over 1 mbpd less demand growth than OPEC for this year. Macroeconomic data reflected more inflation growth with month-over-month PPI beating estimates for April. The market’s reaction was relatively tame but if tomorrow’s CPI print follows a similar path, stronger headwinds may be faced. Hedgers should look to keep DPRs tight to avoid slippage this week with market pressure mounting.
Crude
- Wildfire conditions in Canada have worsened and are again threatening crude supply with up to 3.3 mbpd at risk.
- OPEC released its monthly report yesterday and left its 2024 global oil demand growth forecast unchanged at 2.25 mbpd.
- OPEC is now reporting secondary source oil production for non-OPEC allies (OPEC+) and total production fell 246,000 bpd to 41.020 mbpd in April.
- Reuters estimates crude stocks fell 1.2 million barrels last week.
- The IEA will release its monthly report tomorrow.
- The API will release its inventory survey this afternoon at 3:30 pm CT.
- US April PPI ran hot showing 0.5% m/m growth vs 0.3% est.
- As of 9:04 am CST: Brent crude oil down $0.40 to $82.96, US dollar index down $0.194 to 105.022 while the nearby e-mini S&P 500 futures contract is up 4.25 to 5250.00.
Diesel
- US corn planting was reported at 49% complete vs 49% est and 54% avg.
- Group 3 and Chicago diesel basis have slipped to 5-year lows.
- Reuters estimates diesel stocks rose 800,000 barrels last week.
Gasoline
- AAA forecasts a record 38.4 million barrels will travel over Memorial Day weekend
- Russia is again considering a lift of its gasoline export ban after new government is in place.
- The prompt RBOB crack has fallen to its lowest level this year.
- Reuters estimates gasoline stocks rose 300,000 barrels last week.
Propane
- Conway is trading at .6725 while Belvieu is trading at .6850.
- Conway Swap Oct24-Mar25 strip indicative midpoint ~.7325.
- Conway propane is trading at 36% to WTI.
Natural Gas
- Overnight weather runs added 3 TDDs to the two-week forecast.
- Reuters estimates natural gas stocks rose between 72 and 78 Bcf last week.
- European gas storage sits 64% full vs 51% for the 5-year seasonal average.
Diesel Margins: Along with the US, diesel margins across the globe are shrinking on soft demand. A prolonged high interest rate environment will likely continue to provide headwinds for refiners.
